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Bitcoin Block Size War - A Civil War Without A Truce

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2023-05-22
Bitcoin Block Size War - A Civil War Without A Truce

The Bitcoin block size war has been one of the most contentious debates in the Bitcoin community over the past few years. The crux of the issue comes down to scalability - how Bitcoin should scale to handle more transactions and adoption. One faction (the ‘Big Blockers’) believes the block, which includes all transaction data, should be increased in size to allow for higher throughput. The other faction - you guessed it, the ‘Small Blockers’ - believes block size should be kept small to prioritize decentralization and security.

A brief history of block sizes

Back in 2010, Satoshi Nakamoto added a seemingly arbitrary block size limit of 1MB to Bitcoin. Their anonymity added yet another layer of mystery to this decision and their intent. Many speculate this was an extra insurance to ensure the Bitcoin blockchain remains permissionless and retains a low entry barrier, since participants must download all block data to join the network without a third party.

The 1MB blocks soon became a major hurdle as Bitcoin rose to fame in a few years. These blocks are confirmed roughly every 10 minutes but contain only 1,500 to 3,000 transactions each. More and more transactions are queuing in the mempool and bidding for precious block space as gas fees grow higher and higher. Another voice soon emerged.

The "Big Blockers" argued that increasing the block size, say to 2MB or 4MB, would allow for more transactions in each block and reduce delays. An increase in throughput will no doubt help pave the way for Bitcoin to become a global currency and payment solution - something that even Small Blockers would love to see.

The opposing faction, however, argued that an increase in block size poses a risk to decentralization because larger blocks make it more difficult for small-time miners and nodes to keep up with the network. They feared a concentration of power in large mining pools if small players were priced out. Some also thought that increasing block size to solve scalability issues was like trying to suffocate a fire with wood piles. This dangerous precedence may breed lazy developers who see this as the silver bullet to every problem instead of seeking better block space usage and other scaling solutions.

A lousy compromise

In 2016, the Hong Kong agreement seemed a compromise enough to indicate that the two factions had finally found common ground. With Segregated Witness (SegWit) implementation, witness information was removed from the block, and data size was reduced. This agreement also included an increase in the block size to around 2MB. Big Blockers could cheer for this decision, while Small Blockers should be happy to see more efficient block space utilization.

But that couldn’t be further from the case. Big Blockers deemed this increase a lousy, temporary fix that would run into another size wall very soon, while Small Blockers were firmly against increasing block size in any fashion. No consensus was reached.

Developers and evangelists soon started searching for other solutions. In August 2017, the Big Blockers went ahead with a hard fork to create Bitcoin Cash (BCH), which started with an 8MB block size. Bitcoin remained with a 1MB block size but adopted the SegWit soft fork to enable more transactions. SegWit made other optimizations to increase the effective block size to between 1.6 to 2MB.

A temporary peace

The block size war has calmed since the BCH hard fork. However, the debate around scalability continues in both the BTC and BCH communities. BCH has increased its block size to 32MB but still has excess capacity. The Bitcoin community continues researching solutions like the Lightning Network, Liquid Network, schnorr signatures, and other optimizations to increase transaction capacity. It was also made loud and clear recently that Bitcoin is in dire need of a working scaling solution, as the emergence of Ordinal NFTs and BRC-20 tokens put these primal blocks through another brutal test.

Both big and small blockers have valid arguments around balancing scalability and decentralization. There are good-faith actors on both sides wanting to see Bitcoin succeed. However, there remains disagreement over the best path forward. The block size debate is representative of the governance challenges in a decentralized protocol like Bitcoin. Ultimately, a consensus is hard to reach, and disputes may only be settled by the users - which feature they favor and which coins they value.

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